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Model Analysis andD Expectations of Causalities and Cointegrations between some Basic Economic Indicators : Case of Croatia

Expectations in economics can be generally defined as forecasts of the future values of uncertain and fluctuating variables, such as interest rates, prices or tax rates. They are increasingly assuming importance in economic theories. To prove such economic viewpoint there are numerous econometric studies in literature, as well as studies of time series for growth rate, money supply and GDP. Causality tests are carried out for stationary stochastic processes, which naturally are also theoretically interrelated. In order to analyse the long-term relation between the original time series we apply common regression and error correction model (ECM). After presenting the process of testing and analysis, application on the basic economic variables in Croatian economy is carried out. Considering econometric and economic criteria, the aim of this study is to use the explained results to indicate how much the authentically evaluated parameters reflect and forecast the conditions in the Croatian economy.

cointegrations; common regression; error correction model (ECM)

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